Credit Shocks and Macroeconomic Fluctuations in Emerging Markets
30 Pages Posted: 26 Jun 2013
Date Written: June 25, 2013
Abstract
In this paper, we examine the role of global and domestic credit supply shocks in macroeconomic fluctuations for Emerging Markets. For this purpose, we impose a set of zero and sign restrictions within a medium-scale Bayesian Vector Auto-Regressive model. Quarterly data from South Africa and G-7 countries in 1985-2010 show that credit supply shocks impact significantly on macroeconomic aggregates in these economies. However, credit supply shocks have played, on average, a less important role than credit demand shocks. Moreover, shocks originating from G7-countries are the main drivers of real activity in South Africa, although they played a marginal role in the 1996-1999 South African recession.
Keywords: credit shocks, developing countries, macroeconomic stabilization policies, sign restrictions, Bayesian VAR
JEL Classification: C510, C330, C150, C530, E300, E430, E520, N170
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